OPEC Fears Oil Price Rally May Boost U.S. Shale Output

Date: 12/01/18

Reuters

Oil’s price rally this year to its highest since May 2015 may seem a source of glee for Opec, but some in the producer group fear the gains could prompt shale companies to crank open their spigots and flood the market.

Benchmark Brent crude rose further above US$68 a barrel on Tuesday, supported by oil output cuts – led by the Organisation of the Petroleum Exporting Countries and its allies including Russia – that are due to run until the end of this year.

The surge comes as a welcome boost for the revenues of oil-producing nations, many still reeling from a price collapse that started in mid-2014 when crude began to fall steeply from above US$100 per barrel due to oversupply.

Some in Opec are worried a prolonged rally could stimulate more US shale oil output, however, creating more oversupply that could weigh on prices and market share.